Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- St James's Place PLC (STJPF, Financial) reported record funds under management (FUM) of GBP181.9 billion at the end of June 2024.
- Gross inflows increased by 6% year-over-year to GBP8.5 billion for the first half of 2024.
- The company achieved an underlying post-tax cash result of GBP205 million, demonstrating business health.
- The business review reinforced the company's conviction in its strong market position and future growth potential.
- St James's Place PLC (STJPF) has a robust plan to simplify and standardize its charging structure by the second half of 2025.
Negative Points
- The UK economy remains sluggish, with rising mortgage costs impacting consumer confidence.
- Outflows remain elevated due to cost-of-living pressures, with clients drawing on savings to meet immediate needs.
- The company faces significant costs related to implementing a new charging structure, estimated between GBP140 million and GBP160 million before tax.
- A provision of GBP426 million before tax has been established for potential client refunds related to historic ongoing service evidence.
- The company has not yet taken credit for amounts expected to be recovered from the partnership, adding uncertainty to financial projections.
Q & A Highlights
Q: Can you elaborate on the plan to double underlying cash results by 2030?
A: (Mark Fitzpatrick, CEO) The growth will be driven by structural recovery starting in 2027, reflecting the removal of initial charges and the benefits of new business and the unwind of amounts in gestation. (Craig Gentle, CFO) Consensus is an average, and the modeling approach in latter years will influence the output.
Q: What are your plans for expanding market share in the high-net-worth segment?
A: (Mark Fitzpatrick, CEO) We currently have 9% of our FUM in the high-net-worth segment, which is expected to grow faster than other segments. We will focus on extending our investment proposition and supporting advisers to engage in this market, particularly during the amplify phase of our strategy.
Q: What is your medium-term growth ambition for adviser numbers?
A: (Mark Fitzpatrick, CEO) We expect adviser numbers to grow over time, but our focus is on driving productivity and enhancing quality. The Academy continues to be a strong pipeline for new advisers, and we aim to improve the partner and client experience through technology enhancements.
Q: Can you discuss the potential for changes to the charging model and your relationship with the regulator?
A: (Mark Fitzpatrick, CEO) The relationship with the regulator has improved and is open and transparent. We are not expecting significant changes to the charging model beyond what has already been announced.
Q: What gave the Board confidence to bring forward the share buyback?
A: (Craig Gentle, CFO) Factors include the operating environment, the rhythm of value emergence in the cash result, progress on fees and charges changes, and confidence in the adequacy of the provision for ongoing servicing.
Q: What are the biggest hurdles in implementing cost-cutting and investment initiatives?
A: (Mark Fitzpatrick, CEO) The biggest hurdle is ensuring a controlled and measured approach that does not inhibit growth opportunities. We will focus on automating processes and simplifying the interface for advisers to maximize efficiency.
Q: Can you provide an update on the cadence of complaints and their impact?
A: (Mark Fitzpatrick, CEO) Complaints spiked in March following our announcements but have significantly decreased in the second quarter and continue to decline.
Q: How do higher interest rates impact partner lending and adviser recruitment?
A: (Craig Gentle, CFO) Higher interest rates are generally unwelcome, but market performance has been a positive offset. For new advisers, the majority join existing partnerships, mitigating the impact of high borrowing costs.
Q: What are your thoughts on the FCA advice guidance boundary review?
A: (Mark Fitzpatrick, CEO) We are actively engaged with the FCA and government on this issue. It's too early to predict the outcome, but we are providing input and awaiting further developments.
Q: Can you confirm the market return assumptions underlying your FUM and cash growth targets?
A: (Mark Fitzpatrick, CEO) We are assuming a market return of 4% to 5% after fees.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
